First half year results for the 2000/01 business year

BERU sales up 12% and profits up 48% in the first half-year

Ludwigsburg, November 15, 2001 ¬ó In difficult market conditions, BERU increased its sales by 11.9% to Euro 139.8 million in the first half of 2001/02. Last year, sales during this period totalled Euro 124.9 million. One-off income items included, the Ludwigsburg-based automotive supplier increased its half-year net income by almost half to Euro 19.0 million. Adjusted earnings per share increased by 19.5% to Euro 1.47 (1.23).

The Group invested a total of Euro 7.2 million predominantely for rationalization measures and the expansion of the sensor and electronics business area. As the company is profiting from the increasing number of diesel car registrations in Europe and business with new electronic components for vehicles is expanding, the Management Board is confident of growth even in the current difficult conditions.

Group sales increase by 12%

In spite of a weak European market in which new car registrations fell by 0.4%, first half-year 2001 sales (April 1 to September 31, 2001) were again up, assisted by the acquisition policy of the company. Sales increased by 11.9% to Euro 139.8 million (124.9). The Korean company Hyunil in Chungju- City, that had been taken-over in January 2001, accounted for sales of Euro 9 million. The value of orders in hand increased to Euro 140.3 million (131.1). The value of order intake increased by 5.3% to Euro 146.3 (138.9).

Diesel cold-start technology continues to generate growth

With an 8.4% increase in new car registrations during the first half-year in Europe, the most important diesel market in the world, diesel cars clearly outperformed the overall automobile market. A number of OEMs continued to experience production bottlenecks. Noticeable slack sales was recorded in the USA and Asia. Sales of diesel cold-start technology products increased by 6.5% from Euro 63.3 million to Euro 67.4 million. However, their share of Group sales fell from 50.7% to 48.2% as a result of the strong growth in electronics and sensor technology.

BERU expanded sales with the OEM market. Production of the electronically- controlled ISS Instant Start System for the entire range of BMW diesel engines has started. Other manufacturers have also shown considerable interest in this BERU system. Business with price-sensitive water glow plugs continues to decline. These are currently used to heat the cooling water circuit in cars but will be replaced by BERU´s ceramic PTC (Positive Temperature Coefficient) heaters from mid-2002 on. In the USA and Europe, a collapse in commercial vehicle registrations hindered further growth in flame-start systems for large diesel engines and this was negatively reflected in diesel cold-start technology business figures. In the aftermarket business, the company has profitted from its high OEM share and the high growth in new diesel registrations in recent years by recording further growth.

Acquisition-driven sales of ignition technology up

Sales of ignition technology increased by 8.2% from Euro 46.1 million last year to Euro 49.9 million. A significant contribution to this was made by the consolidation of the ignition technology company, Hyunil Electronics Co., Ltd. in Korea in which BERU acquired the majority stake on January 1, 2001. Demand for the novel cigar-shaped ignition coils continues to increase.

Satisfactory developments in the new Electronics and Sensor technology business field

In the business field of Electronics and Sensor technology, BERU expanded sales by 45.2% from Euro 15.5 million to Euro 22.5 million. 16.1% of Group sales are thus generated by this field from which the company expects the highest growth rates in the future. Electronic tire pressure monitoring systems accounted for sales of Euro 4.2 million (2.7), an increase of 55.6%. The number of European automobile manufacturers which offer this as standard equipment has hardly increased. However, BERU expects a significant increase in demand for this safety-relevant product as a result of new US legislation.

Tire Pressure Monitoring as the second pillar of growth

Legislation in the USA requiring all new cars and light trucks to be fitted with tire pressure monitoring systems from November 2003 holds great potential. BERU cooperates closely with Lear, Inc. in Southfield/USA and offers a cost-saving integrated solution for the North American market which combines remote keyless entry (RKE) with electronic tire pressure monitoring. In North America Lear has a 35% market share in remote keyless entry systems. It is expected that the American National Highway Traffic Safety Administration (NHTSA) will publish system specifications by the end of the year. In initial testing, the BERU system was ranked »top of the line«. Only sensor-based, direct-measuring systems fulfilled testing requirements. US automobile manufacturers are expected to place orders for 2004 build-year models in the next few months.

Good profitability in spite of expansion

The expansion of electronic and sensor business activities continued to be characterized by high advance payments for capex and general cost factors. The expenses are single-digit million sums which have yet to be covered by revenues of sold goods. Major advance development work for the coming years is being performed. In the area of tire pressure monitoring, BERU is concentrating on research and development as well as the application of tire pressure monitoring systems on new platforms to prepare for high growth opportunities. EBIT increased by 21.9% from Euro 21.0 million to Euro 25.6 million. The company´s operating margin (earnings before interest and taxes) was 18.3% following 16.8% last year. Adjusted for one-off income from the sale of securities in the US companies, Stoneridge, Inc. in Novi and Impco Technologies, Inc. in Cerritos totalling Euro 3.1 million, EBIT came in at Euro 22.5 million, the margin was at 16.1%.

Hyunil consolidation and electronics expansion increase material costs

The increase in Group output due to demand and the consolidation of Hyunil caused the number of employees to increase by 4.1% to 2.073 (1.991). Personnel costs increased to Euro 42.4 million (38.7). The company also recorded a satisfactory decline in the share of personnel expenses to 30.3% (31.0). On the other hand, material costs increased by 38.6% from Euro 41.2 million last year to Euro 57.1 million. As expected, the share of material costs at 40.8% was up on last year (33.0). The higher cost of purchasing electronic components as well as the consolidation of the Korean company Hyunil with a materials cost share of almost 80%, caused this disproportional increase. Further reasons were the stocking-up of diesel engine glow plugs ahead of higher expected sales during the winter months and the disproportional, 15.1% increase in Group output. For the full-year however, the Management Board expects a significant drop in the share of material costs towards 35%. By exercising effective cost control, other operating expenses, which include the cost of marketing and sales as well as operation and administration, increased under-proportionally by only 3.8% to sales and totalled Euro 22.0 million (21.2).

High investments in »Formela BERU«

The levels of investment made by BERU in the expansion of its future activities in the area of vehicle electronics remained high at Euro 7.2 million but were nevertheless significantly down on the previous year´s total of Euro 15.4 million. As a result of the lower investment ratio and the German tax reform, the company reduced its depreciation on fixed tangible and intangible assets to Euro 9.3 million (9.9). For the year as a whole, BERU expects investments in the range of Euro 20 million will be required for the implementation of the company strategy »Formula BERU« = Diesel + Electronics, the largest part of which will be used for the expansion of electronics activities at the Bretten site in Germany and in Budapest/Hungary.

Net income up 48%

Lower interest rates weighed on the financial result and investment earnings which fell from Euro 2.2 million to Euro 1.8 million. The pre-tax result was 18.1% up from Euro 23.2 million last year to Euro 27.4 million. As a result of the increasingly international structure of the Group and the effects of German tax reform, the tax rate fell from 44.8% to 30.7%. This significant decline was primarily due to a tax-free one-off capital gain from the sale of securities in the US companies, Stoneridge Inc. and Impco Technologies Inc. For the full year, BERU forecasts a tax rate of 40 to 41% before one- off effects following 42,6% in the last fiscal year. After tax, company earnings were up 48.4%. Net income increased from Euro 12.8 million to Euro 19.0 million. BERU´s DVFA/SG result, which is adjusted for one-off and extraordinary items, rose from Euro 12.3 million to Euro 14.7 million. Adjusted earnings per share were up 19.5% and totalled Euro 1.47 (1.23).

Significant funds are available for acquisitions

The Group´s Ceo and Chairman, Ulrich Ruetz, plans to increase full-year sales by five to six percent by internal growth. In spite of the expected slackening of global car production, particularly in the USA, experts continue to forecast growth in the diesel sector. Ruetz explains, »Increasing sales of tire pressure monitoring systems and the planned mid-2002 introduction of PTC heating systems for direct-injection diesel and gasoline engines will increasingly contribute to the profitable growth of the Group. Our acquisition policy will profit from lower company valuations in the auto sector and a number of players are under pressure to sell. At present we are examining a number of interesting potential acquisitions on the European market. However, the product perspectives and the price must be right. External growth should also increase the Group´s profitability and return on capital.«

Consolidated Profit and Loss Account
First half-year (April 1, ¬ó September 30, 2001)

	2001/2002 EUR mn	2000/2001 EUR mn	change in %
Sales	139.8	124.9	11.9
Change in inventory of finished products and other work-in-process	9.1	4.3	111.6
Other own work capitalized	0.1	0.3	-66.7
Other operating income	7.4	2.5	196.0
Material costs	-57.1	-41.2	38.6
Personnel expenses	-42.4	-38.7	9.6
Depreciation	-9.3	-9.9	-6.1
Other operating expenses	-22.0	-21.2	3.8
Profit before investment and financial result and taxes *	25.6	21.0	21.9
Investment earnings and financial result	1.8	2.2	-18.2
Income from ordinary activities *	27.4	23.2	18.1
Profit before taxes *	27.4	23.2	18.1
Taxes on income and earnings	-8.4	-10.4	-19.2
Net income *	19.0	12.8	48.4
Preliminary DFVA/SG earnings	14.7	12.3	19.5
Earnings per share (in Euro)	1.47	1.23
* incl. one-off tax-free income from sale of shares	3.1

Cash Flow statement of the Group
First half-year (April 1, ¬ó September 30, 2001)

	2001/2002 EUR mn	2000/2001 EUR mn
Net income (incl. shares in results by minority shareholders)	19.0	12.8
Depreciation on intangible fixed assets and tangible assets	9.3	9.9
Decrease in accruals	-6.9	-7.3
Other expenses/income not affecting cash flow	-0.4	-0.1
Profit arising from the disposal of intangible fixes assets and tangible assets	-2.5	-
Increase in inventories, trade receivables as well as other assets not allocated to investment or financing activities	-10.7	-11.1
Increase in liabilities arising from trade receivables as well as other liabalities not allocated to investment or financing activities	3.4	8.2
Cash flow from current operating activities	11.2	12.4
Deposits arising from the disposal of fixed assets	0.1	-
Payments for investments in fixed assets	-5.7	-15.0
Payments for investments in intangible assets	-0.1	-0.4
Deposits arising from the disposal of financial assets	3.8	-
Payments for investments in financial assets	-1.4	-
Cash flow from investment activities	-3.3	-15.4
Payments for dividends	-9.2	-9.7
Deposits arising from taking-up finance credit	3.9	10.8
Payments arising from finance credit amortization payments	-0.6	-0.5
Cash flow arising from financing activities	-5.9	0.6
Changes in funds affecting cash flow	2.0	-2.4
Total funds at the beginning of the period	74.6	78.5
Total funds at the end of the period	76.6	76.1

Sales by segments (Distribution Channels)
First half-year (April 1, ¬ó September 30, 2001)

	2001/2002 EUR mn	2000/2001 EUR mn
OEM	92.8	83.4
After-market	39.5	34.7
General industry	7.5	6.8
	139.8	124.9

Group Cash flow
First half-year (April 1, ¬ó September 30, 2001)

	2001/2002 EUR mn	2000/2001 EUR mn
Net income	19.0	12.8
Depreciation	9.3	9.9
Change in long-term accruals	0.0	0.0
	28.3	22.7

Consolidated Balance Sheet
First half-year (April 1, ¬ó September 30, 2001)

Aktiva	09/30/2001 EUR mn	03/31/2001 EUR mn
Fixed assets
Intangible assets	13.8	15.2
Property. plant and equipment	70.3	72.4
Financial assets	16.7	16.6
	100.8	104.2
Current assets
Inventories	52.5	36.3
Accounts receivable and other assets
Trading accounts receivable	46.3	53.6
Accounts receivable from affiliated companies	3.8	2.9
Other assets	5.8	5.0
	55.9	61.5
Marketable securities	13.1	17.6
Liquid assets	63.3	57.0
	185.0	172.4
Deferred charges and prepaid expenses	1.2	1.1
	287.0	277.7
Passiva	09/30/2001 EUR mn	03/31/2001 EUR mn
Shareholders´ equity
Subscribed capital	26.0	26.0
Capital surplus	73.2	73.2
Earnings reserves	71.7	66.9
Retained earnings	19.3	14.4
Other shareholders´ equity	2.0	2.0
	192.2	182.5
Special items from investment subsidies	2.0	2.2
Provisions
Provisions for pensions and similar obligations	10.9	10.9
Other provisions	35.7	42.6
	46.6	53.5
Liabilities
Liabilities due to banks	18.6	15.3
Trade accounts payable	15.9	16.1
Notes	1.6	1.0
Accounts due to affiliated companies	0.2	0.9
Other liabilities	9.8	6.1
	46.1	39.4
Deferred expenses and accruals	0.1	0.1
	287.0	277.7

BERU Group is a listed public company since October 1997. The company is the leading manufacturer of diesel cold-start systems with an estimated world- wide market share of 40% for glow plugs. In the field of ignition technology for gasoline engines BERU is one of the four major manufacturers in Europe. The company also produces suppresor devices, sensors, ignition systems for the oil and gas burner industry as well as electronic controlling units. Almost all OE- manufacturers of automobiles, commercial vehicles and engines are BERU´s customers. The company´s headquarters are located in Ludwigsburg.